Understanding rent reviews in commercial leases
What rent reviews are, how they work, and why the review mechanism in your lease matters. Covers market reviews, CPI adjustments, fixed increases, and ratchet clauses.
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Commercial Property
Due diligence isn't optional.
Commercial property is complex. Title issues, lease obligations, compliance gaps, and engineering issues can turn a sound investment into a costly mistake.
The Commercial Property Journey
Four stages. Zero shortcuts.
Every commercial transaction follows this path. We protect your interests at each stage.
Stage 1
Due Diligence
Title analysis. Lease review. Compliance checks. Environmental assessments. We find the problems before you own them.
Stage 2
Contract
Terms that protect you. Conditions that give you options. GST treatment that's correct from day one.
Stage 3
Settlement
Financing. Rent apportionments. Operating expense adjustments. Clean title registration.
Stage 4
Beyond
Lease management. Rent reviews. Refinancing. Exit strategy. Your investment needs ongoing attention.
Due Diligence
What we examine.
Commercial property due diligence goes far beyond a standard LIM report. We investigate everything that could affect your investment, your use, or your exit.
Title Analysis
Encumbrances, easements, covenants, and restrictions. We identify anything that could affect your intended use or future development potential.
Lease Review
For tenanted properties: rent review mechanisms, tenant obligations, renewal rights, and security deposits. Lease terms directly affect your return.
Building Compliance
Consent records, code compliance certificates, outstanding notices. NBS seismic ratings. BWOF requirements where applicable.
Planning & Zoning
District Plan rules, permitted activities, and resource consent requirements for your intended use.
Environmental
Contaminated land records, HAIL site status, and any environmental obligations that transfer with ownership.
Body Corporate
For unit titles: levies, meeting minutes, long-term maintenance plans, and any pending special levies.
The Question
Lease or buy?
Both paths have merit. The right answer depends on your business stage, capital position, and growth plans.
Commercial Leasing
Flexibility without capital lock-up. But commercial leases offer none of the protections you know from residential tenancies.
Ratchet clauses
— rent can only go up, never down
Make-good obligations
— expensive at lease end
Personal guarantees
— directors often personally liable
Exit options — usually limited or costly
We review every clause before you sign
Commercial Acquisition
Control and capital growth. But the complexity demands thorough investigation before you commit.
GST complexity
— registration status, zero-rating, going concerns
Existing tenancies
— you inherit the lease obligations
Seismic issues
— NBS ratings affect insurance and use
Settlement adjustments
— rates, rent, operating expenses
We protect your position at every stage
Local Knowledge
Hawke's Bay commercial realities.
The local market has distinctive characteristics that affect every transaction. We've been advising here for 150 years.
Seismic Risk
Critical Factor
NBS ratings affect values, insurance premiums, and lender appetite. You should understand the seismic position of any property.
Art Deco Heritage
Napier CBD
Heritage listings create opportunities and constraints. Strengthening requirements interact with heritage rules in complex ways.
Industrial Sector
Primary Industry
Processing facilities, cool stores, and logistics operations have specific consent and compliance requirements.
Post-Gabrielle
Current Reality
Flood risk, infrastructure condition, and building damage require careful evaluation in every transaction.
How We Help
Acquisitions
Buying Commercial
End-to-end support from due diligence through settlement. We protect your investment at every stage.
Leasing
Landlords & Tenants
Lease preparation, review, renewals, and dispute resolution. We act for both landlords and tenants.
Development
Site to Settlement
Site acquisition, resource consent support, construction contracts, subdivision, and pre-sales structures.
Portfolio Advisory
Investors
Structuring, ongoing lease management, refinancing, and exit planning for commercial property portfolios.
Commercial Risks
What can go wrong.
Issues we've seen derail commercial transactions. Each one is preventable with proper due diligence.
01
GST Misalignment
Purchaser and vendor with different GST status. Unexpected liability at settlement.
Preventable
02
Undisclosed Tenancies
Lease terms that weren't properly disclosed. Rent reviews locked in unfavourably.
Preventable
03
Compliance Gaps
Unconsented works. Missing CCCs. Earthquake-prone building notices discovered post-purchase.
Preventable
04
Environmental Liability
HAIL site contamination. Clean-up obligations that transfer with the property.
Preventable
Client Observations
What Our Clients Say
"Paul was a real pleasure to deal with & exceeded our expectations."
To ensure candour, all feedback was collected anonymously.
Resources
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Related Reading
Commercial lease review: What tenants must check
Commercial leases have no consumer protections. Before you sign, understand what you are committing to and the clauses that could cost your business.
Read articleUnderstanding outgoings in commercial leases
Outgoings are the extra costs tenants pay beyond base rent. Understanding what is included, how they are calculated, and your right to transparency helps you budget accurately.
Read article
Your Commercial Property Team
Meet the team
behind your commercial property matters
Common Questions
Commercial due diligence usually takes two to four weeks, depending on the complexity of the property. Tenanted properties with multiple leases require more time to analyse. Unit title properties need body corporate records.
We recommend building adequate time into your agreement conditions.
The answer depends on your circumstances. Buying through a company or trust can provide asset protection but may affect financing options. Tax treatment differs between structures.
We discuss your specific situation and help you understand the implications of each approach.
A Warrant of Building Fitness (WBOF) is a compliance document required for buildings with specified systems such as lifts, automatic doors, air conditioning, or certain fire safety systems. The building owner must ensure these systems are inspected and certified annually.
If a property requires a WBOF, you inherit this compliance obligation when you purchase.
Rent review mechanisms vary significantly between leases. Common approaches include market rent review, CPI increases, fixed percentage increases, or ratchet clauses (where rent can only go up).
The mechanism directly affects your investment return over time. We analyse rent review terms carefully when reviewing leases.
When you purchase a tenanted commercial property, you become the landlord under the existing lease. All landlord obligations transfer to you.
Before purchasing, we analyse the lease terms, tenant payment history, and any outstanding issues. You need to understand what you are inheriting.
Yes. While our deep local knowledge is particularly valuable for Hawke's Bay properties, we handle commercial property transactions throughout New Zealand. Our systems and processes enable us to manage transactions anywhere in the country.
An assignment transfers the existing lease to a new tenant. The original terms continue, and often the original tenant remains liable if the new tenant defaults.
A new lease involves negotiating fresh terms with a new tenant. Each approach has implications for both landlords and tenants.
We recommend consulting an insurance broker for commercial property insurance. Commercial policies differ significantly from residential insurance.
We can identify insurance-related matters during due diligence, but specialist insurance advice ensures you have appropriate cover.
Before signing, review the rent review mechanism, outgoings allocation, personal guarantee requirements, assignment rights, and make-good obligations. Commercial leases differ significantly from residential tenancies, and there's no Consumer Guarantees Act protection.
We recommend professional legal review before committing. A small investment in lease review can save significant money over a 3-6 year term.
A ratchet clause means rent can only go up at review, never down, even if market rents fall. This protects the landlord but can leave tenants paying above-market rent.
We recommend resisting ratchet clauses where possible, or negotiating alternative review mechanisms that allow for market adjustments.
You can't unilaterally break a commercial lease. Options include: negotiating early termination with your landlord (usually involves a surrender fee), assigning the lease to another tenant, or subletting with landlord consent.
Simply abandoning the premises leaves you liable for rent until the lease ends or the landlord re-lets the property.
Make-good obligations require you to return the premises in a specified condition when leaving. This can mean removing all fit-out, repairing damage, repainting, and sometimes returning to shell condition.
Make-good can be a substantial expense for larger premises. Know your obligations early and budget accordingly.
A personal guarantee means you (as director or individual) are personally liable for rent if your company defaults. On a 6-year lease at $100,000/year, that's potential personal liability of $600,000.
This often continues even after assigning the lease to a new tenant. We explain guarantee implications and try to negotiate limitations where possible.
